What is Transfer of Risk?
Whoever is the owner of goods would bear the risk of damages that happen to the goods while it is still his property. This is encapsulated in the maxim “res periit domino suo” which literally means “the destruction of a thing is a loss to its owner”.
By the provisions of S.20 of the SOGA, risk in the goods lies with the seller but passes from seller to buyer when the property in the goods is passed, whether or not delivery has been made. It is further provided that if delay of delivery is as a result of the action of either buyer or seller, such person would be liable for any damages that would not have occurred but for such delay. However, this provision does not affect the duties which accrue if the seller or buyer is the bailee or custodier for the other party.
In the case of Wardars Import and Export Ltd vs W.Norwood & Sons (1968) 2 WLR 1440, X had 1500 cartons of frozen kidneys in Y’s warehouse. He sold 600 cartons to Z and gave him a delivery note addressed to Y. When Z’s carrier arrived at the warehouse, he saw that the 600 cartons were already out on the pavement. Y accepted the delivery note from the carrier. At 8 am, loading started, however, the carrier didn’t turn on the refrigerator in his van till 10 am by which time the cartons on the pavement were dripping.
Loading was concluded at 12 pm and the carrier signed a receipt stating that he had received the goods in soft condition. On delivery to Z, it was found out that the goods were of unmerchantable quality. and thus Z refused to pay.
In court it was held that property in the goods passed when Y, a third party, acknowledged that the goods were for Z by accepting the delivery note. Thus, since property had already passed to the buyer when the damage to the goods occured, the risk would have to be borne by the buyer.
Exceptions To The Rule
- Where there is a contrary agreement between the parties, the agreement binds them;s.20
- If delay is caused by either of the parties, the party responsible for the delay would bear the risk;S.20.
- For goods that are sent by sea, the right passes if the carrier successfully delivers them to the buyer. However, the seller should inform the buyer of the need to insure the goods. If the buyer refuses to insure the goods, the risk passes to the buyer; 32 SOGA.
- Where the seller agrees to deliver the goods at a place other than the agreed place at the instance of the buyer, the buyer would bear the risk of deterioration in the course of transit; S.33 SOGA.
- Lecture on Commercial Law delivered by Dr. Mrs H.I Saadu, Faculty of Law, University of Ilorin.
- MC Okany: Nigerian Commercial Law
- Sales of Goods Act